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INDIA IN THE NEW KNOWLEDGE ECONOMY
The Changing Scenario
Dr. Naresh Trehan
Chairman, CII National Committee on
Healthcare & Executive Director
Escorts Heart Institute and Research
Centre, New Delhi, India
INDIA IN THE NEW KNOWLEDGE ECONOMY
Transition from BPO to KPO Destination
Growth of Services sector
8+%
Contribution to India’s GDP
51 + %
Knowledge Process Outsourcing - To grow 46% to $ 17 Billion by 2010
Emerging Trends in the last two years:
 Silicon Valley VCs setting shop
 US companies relocating up to 95% of R&D work in next generation technologies especially in the
wireless space & optical networking systems.
 Intel, Cisco doing core development work on chip design.
 Texas Instrument has its global centre for wireless LAN & semi-conductors R&D based in India
 Tech Multinationals have filed 1, 700 global patents for product developed out of India
 Automotive engineering design services (AEDS) projects – already executed $ 500 million worth of
Global Contacts – Bosch’s Indian team does major chunk of Diesel systems development in India
PRODUCT DEVELOPMENT REQUIRES ONE – FOURTH THE INVESTMENT IN INDIA
INDIA IN THE NEW KNOWLEDGE ECONOMY
 Healthcare
 Pharma & Biotechnology
 Information & Communication
Technology (ICT)
Indian Healthcare : The Changing Scenario
Current Healthcare Landscape
Indian Healthcare : The Changing Scenario
INDIA SPENDS US $ 22.7 BILLION ON HEALTHCARE
5.2% of
GDP
22.7
3.7
Total
Healthcare
Market
* Retail
Source: National Accounts Statistics 2001; McKinsey analysis
Pharma
market*
19
Healthcare
delivery
market
Indian Healthcare : The Changing Scenario
THE HEALTHCARE DELIVERY SECTOR PLAYS AN
IMPORTANT ROLE IN THE ECONOMY TODAY
Sector
Direct employment
Million, 2000-2001
Healthcare
5.2
5.3
Retail banking
1.0
Power
1.2
Railways
1.6
0.8
Hotels, restaurants
IT
Per cent, 2000-2001
4.0
Education
Telecom
Revenues/GDP
1.7
0.4
4.8
3.5
3.0
1.8
1.4
Healthcare is the
largest service
industry in terms
of revenues and
the second
largest after
education in
terms of
employment
0.9
1.7
By 2012, the sector could account for 7 to 8 per cent of GDP and provide
direct and indirect employment of 9 million
Source: National Accounts Statistics, 2001; Manpower profile; CBHI; McKinsey analysis
Indian Healthcare : The Changing Scenario
IN TERMS OF DELIVERY, PRIVATE PROVIDERS CAPTURE 63%
0F THE US $ 19 BILLION SPEND
Healthcare provision, 2002
Per cent of total spending
100% = US $ 19 billion
Government and public
employers*
Private providers
(individual, charitable
and for-profit)
63
37
* Including government spend (20%), public employers’ spend (11%) and out-of-pocket spend at government providers (6%)
Source: McKinsey analysis
Indian Healthcare : The Changing Scenario
INDIA: AN EMERGING HEALTHCARE HUB
INDIAN HEALTHCARE CAPABILITY
FACT#1: Proven Indian healthcare system
 Over 60,000 cardiac surgeries done
per year with out comes at par with
international standards
 Multi organ transplants like Renal,
Liver, Heart, Bone Marrow
Transplants, are successfully
performed at one tenth the cost.
 Patients from over 55 countries
treated at Indian Hospitals.
INDIA HAS THE OPPOURTUNITY TO PROVIDE THE BEST OF
THE WEST & EASTERN HEALTCARE SYSTEMS
Indian Systems Of Medicine “ Staging a Comeback”
 Ayurveda recognized as an
official healthcare system in
Hungary.
 Doctors in the west are
increasingly prescribing Indian
Systems of Medicine
 More than 70% of the American
population prefer a natural
approach to health
 Americans are said to spend
around $25bn on nontraditional medical therapies
and products *
Source : Los Angeles Times
* Economic times dated 25th July 2003
India’s Gift to the World
Ayurveda
Yoga
Siddha
HEALTHCARE….THE SUNRISE INDUSTRY
“Physicians, Nurses, Medical Technicians and Other Scientific
Occupations will Become Growth Industries to Rival the IT Sector within
the Next Decade”
- India Vision 2020 Report
Indian Healthcare : The Changing Scenario
Cost Advantage
PROCEDURE
COST (US$)
US
US
THAILAND
THAILAND
INDIA
UK
Heart Surgery
40,000
7,500
6,000
23,000
Bone Marrow Transplant
2,50,000
-------
26,000
1,50,000
Liver Transplant
3,00,000
-------
69,000
2,00,000
Knee Replacement
20,000
8,000
6,000
12,000
Cosmetic Surgery
20,000
3,500
2,000
10,000
Indian Healthcare : The Changing Scenario
HUGE GROWTH POTENTIAL – TO GROW BETWEEN
US $ 43 – US $ 60 BILLION IN 2012
60.0
US $ IN BILLION at 2000-2001 prices
51.0
43
ESTIMATE
17.0
8.0
8.0
Government
spending
Private
spending
19
3.76
Assumption
* With 6% GDP real growth per year
35.0
15.24
2001
Key
43.0
43.0
Government
Spending
2012
Scenario 1:
Baseline
increase in
private spend
1% GDP
2012
Scenario 2:
Baseline
with
insurance in
middle class
1% GDP
2012
Scenario 3:
Baseline with
insurance and
high
government
spending
2% GDP
Indian Healthcare : The Changing Scenario
INDIA OFFERS HUGE POTENTIAL FOR INVESTMENTS IN
HEALTHCARE OVER THE NEXT 10 YEARS
Investment requirements in India (Estimates)
US $ in Billion Next 10 years
Healthcare
22-31
Power**
Telecom**
Roads**
95-126
40-51
24-33
* Estimates based on analysis detailed in Chapter 3 of this report
** Estimates computed by scaling 2002-06 estimates from Rakesh Mohan committee report by a factor of 1.5-2.0
Investment needs
of the healthcare
sector are
comparable to
other infrastructure
sectors
INDIA IN THE NEW KNOWLEDGE ECONOMY
India’s Growth Sectors Pharmaceuticals & Biotech
The Indian Pharmaceutical Industry
has practically achieved
Self sufficiency
&
Global recognition
as a
Low cost producer
of
High-quality bulk drugs & formulations
KEY ACHIEVEMENTS
India has the 2nd highest number of
qualified doctors in the world. Of every
six medical doctors in the US, one is
Indian
India’s huge population and the
prevalence of a wide spectrum of
disease conditions offer a wide patientresource for clinical trials
While clinical trials cost
approximately $300 to 350 million
in US, they cost only about $25
million in India
Investigational New Drug stage costs
about $100 to 150 million in US, but
costs only around $10 to 15 million in
India
Indian companies are offering custom
synthesis services at 30-50% cost savings
compared to global costs
700,000 science and engineering
graduates & 1500 PhDs qualify annually.
Over 15,000 scientists
CHANGING FACE OF INDIAN PHARMA
Players thinking local
Players thinking global
Indian pharma companies filed the largest number of
Drug Master Files (DMFs) for APIs and 23% of
ANDAs with the USFDA during 2003
Export revenues now contribute over half the
total revenues for the Indian pharma majors
Top 5 Companies Sales & Export Revenues
Rank Company
1
2
3
4
5
Ranbaxy
Cipla
Dr.Reddy's Lab
Aurobindo Pharma
Lupin
Sales ($ mn) Exports ($ mn) Exports %
969
400
336
264
210
736
163
212
128
92
76%
41%
63%
48%
44%
Source: Company reports
Ranbaxy acquired RPG Aventis, France; Wockhardt
acquired CP Pharmaceuticals, UK; Zydus Cadila
acquired Alpharma, France
Pharmaceutical exports increased at a CAGR of
23% during FY1995-FY2002
CHANGING
FACE OF
OF INDIAN
PHARMA
CHANGING
FACE
INDIAN
PHARMA
MNC-Domestic
Competition
MNC-Domestic
Collaboration
Co-marketing
New Drug Research
Glaxo-Cipla,
Wockhardt-Bayer,
Ranbaxy-Knoll tie-ups
Glaxo SmithKline's recent R&D
alliance with Ranbaxy Laboratories
Pharma - IT
COLLABORATION
Novartis processes drug safety data and is
designing clinical development software
Clinical Trials
Novartis, Astra Zeneca and Eli Lilly
making India a global hub for clinical
trials
In-licensing
Local research
Ranbaxy licensing agreement with
KSB, UK for marketing TransMID
Astra Zeneca’s $40 million R&D facility
in Bangalore for TB drug discovery
Source: Media Reports, E&Y
INDIA IN THE NEW KNOWLEDGE ECONOMY
BIOTECHNOLOGY
Market - A Consistent Uptrend
25% growth in investment
2002-03
70% growth in employment
74% growth in R&D
manpower
USD 5 billion annual
revenues
2010
1 million skilled jobs
10% of global industry
Source: Confederation of Indian Industry (CII)
SOURCE FROM INDIAIN BIOTECH
GOING GLOBAL
India’s first genetically
engineered vaccine
costs less than half the
price of competing
vaccines
Shantha BiotechSHANVAC-B meets
40% of the global
demand of Hepatitis
B vaccine.
India: largest producer
of Measles & DTP
vaccines. Vaccine
Biogenerics $25 billion
exports to over 130
biological products going off
countries
patent in 2004. Indian companies
strong in biogenerics
Clinton Foundation
sourcing HIV treatment
from four firms - three
of which are from India
Biocon was the first
enzyme company globally
to receive ISO certification
in 1993
Bio Agri India (2nd largest
producer of food) offers
significant opportunities
to source products
One out of every two children in the world is
immunized by a vaccine made in India
Source: Newspaper Reports
The India Advantage
Excellent network
of research laboratories
Rich biodiversity
Well-developed
base industries
Extensive clinical trials
opportunities
Trained manpower
and knowledge base
INDIA IN THE NEW KNOWLEDGE ECONOMY
Information & Communication
Technology (ICT)
India : Key IT figures
•
Software & services
export(2004-05) ~ US $ 17.5
billion

35
Grown from a $150m in 1991-92

CAGR in last 10 yrs: 35%

Projected to be US $ 50 b in 2008
31.7
30
•
•
•
Software & services
domestic(2004-05) ~ US $
4.5 bn
IT enabled services(2004-05)
~US $ 4.9 bn
IT domestic hardware(200405) ~ US $ 4.8 bn
US$ bn
25
23.8
20
17.1
15
12.2
8.67
10
5 2.04 2.88
3.8 5.03
6.05
0
94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 0405
Balanced Portfolio of IT offerings
Source: McKinsey:NASSCOM
13.5
India: Moving up the Value Chain
Consulting
Embedded
software
Network
Security
Network
Management
Package
Implementation
Application
development
Package
Implementation
Facilities
management
Migration & Reengineering
Unix-based
coding
1960
Mainframe
Maintenance
Client / Server
E-business
applications
Web Enabling
legacy
Maintenance
Internet
2000
Aligned to Technology Needs
Source: SSB, Fall 2000
Telecom Market
 7th largest telecom network in the world
Size (2003)
2010 (projected)
US$ 9 billion
US$ 23 billion
 Telecom network growth rate
30%
 Fixed lines (Dec, 2004)
44.76 million
 Wireless connections (Dec, 2004)
48 million
Rising Teledensity & Telephone Subscribers
Sot
• India is targeting 250 million users by 2007
• India needs $30 billion to meet a target of one phone for every five people by 2010
• Total telecom revenues expected to almost triple from USD9 billion in 2002 to
USD 23-25 billion by 2007.
WORKFORCE SHORTAGES AND
AVENUES OF SUPPLY
Potential surplus population in working age group (2020)
Germany-3 Mn
UK
-2 Mn
0Mn
-1
Mn
Iraq
Ireland
US
-17Mn
France
Spain
-3 Mn
2Mn
-3 Mn
-2 Mn
2Mn
Israel
Iran
0Mn
3Mn
4Mn
Egypt
Mexico
-6
Mn
Turkey
Italy
5Mn
Russia
Czech
Republic
China -10
Mn
Pakistan
19
Mn
47
Mn
-9 Mn
Japan
5Mn
7
Mn
Bangladesh
Philippines
4Mn
India
Vietnam
1Mn
Malaysia
3Mn
5Mn
Indonesia
Brazil
-0.5
Mn
Australia
Note: Potential surplus is calculated keeping the ratio of working population (age group 15 – 59) to total population constant;
Source: U.S. Census Bureau; BCG Analysis
THANK YOU